Introduction

California Governor Gavin Newsom is stirring controversy with his latest initiative to offer rebates exclusively for electric vehicles (EVs) produced by automakers other than Tesla. This move has garnered fierce backlash from Tesla CEO Elon Musk, labeling the decision as "insane," particularly since Tesla is the only manufacturer of EVs based in California.

Details of Newsom's Initiative

On Monday, Newsom introduced the details of his plan to revive the Clean Vehicle Rebate Program, which had expired. This proposal coincides with the anticipated elimination of federal tax credits for EV purchases, a move previously promised by President-elect Donald Trump. Despite Trump’s initial firm stance on ending federal EV tax credits—worth up to $7,500 for new zero-emission vehicles and $4,000 for used ones—he has since softened his approach, especially as Musk has become a key advisor and supporter.

Impact on Tesla and Market Competition

Under the prior program, Tesla vehicles represented approximately 42% of all rebates distributed, according to data from the California Air Resources Board. Newsom argues that excluding Tesla is intended to enhance market competition and promote innovation among newer players in the EV sector, a decision that is under negotiation with the state Legislature.

Elon Musk's Reaction

Musk’s critique on social media highlighted the absurdity of excluding the automaker that has been pivotal in establishing California as a leader in electric mobility. "How is it logical to cut out the largest producer of EVs that operates right here in California?" Musk questioned in a post on X (formerly known as Twitter).

Trump's Criticism of Newsom

In response to Newsom's announcement, Trump took to social media to criticize the Governor, pointing out California's escalating cost of living and homelessness crisis. He remarked that Newsom's actions obstruct "all of the GREAT things that can be done to ‘Make California Great Again.’"

Legislative Response

Newsom has further called for a special legislative session aimed at fortifying state laws in anticipation of potential federal challenges, which he hopes will make the state's green initiatives more resilient against federal rollback. "We're not turning back on a clean transportation future — we’re going to make it more affordable for people to drive vehicles that don’t pollute," Newsom declared.

Analysts' Perspective

This contentious situation is seen by some analysts, including Dan Ives from Wedbush, as a political maneuver that may ignite a "Game of Thrones battle" between Musk and Newsom. Ives warned that this rebating policy, which aims to undermine Tesla’s dominance, could trigger Musk to relocate jobs from Tesla's California plant to its Gigafactory in Austin, Texas—especially following Musk's previous relocations and public disagreements with California authorities regarding pandemic restrictions.

Musk's Frustration with California

Musk has often expressed frustration over California’s regulatory environment, emphasizing his company's shift and expansion into Texas for a more favorable business climate. If tensions continue to rise, both companies and consumers could be swept into what analysts predict could become a dramatic showdown between a tech mogul and a state governor amid an evolving landscape of electric vehicle policies.